Bailout
I knew someone was going to be holding the bag and it wasn’t going to be the banks (thanks Mike Castle!).
Anyway. I’ve got to be honest I have no sympathy for some nit wit who bought a $350,000 house for $550,000 because they thought it was going to be worth $750,000 in a few years.
I just don’t.
I feel no sympathy for companies who loaned the money to them either. They knew that it was a risk, that’s why they charged more. So much for the free market.
I feel much less sympathy for the banks than the homebuyers, at least those who own just the one home.
Jason, I’m a little puzzled by your comment. The home’s value is whatever it sells for. If the going rate is $550,000, you can’t buy it for $350,000. The housing market is overvalued not because the homes aren’t “worth” that much, but because nobody will pay that anymore. Nobody buys a house thinking it won’t appreciate; the problem was that as other investments tanked, too much money went into the housing market.
I won’t even comment on the idiocy of some people wanting to chase 12 million people out of the country. Try to imagine the effect of that on the housing market.
Al I have to think that a system that values homes based 100% on “what the dummy down the street bought this house for” is a flawed system.
There are some underlying inputs that comprise what a house should be worth. Proximity to services, quantity and quality of building materials, etc.
I think there is such a thinks as a house worth $350,000 house in absolute terms.
a system that values homes based 100% on “what the dummy down the street bought this house for”
That is how all goods are priced.
Of course, the Fed helped inflate home prices by keeping interest rates artificially low at a time when they should have been increased (they did this to help Bush “win” the 2004 election).
The junk mortgages should have been illegal. Protecting the economy from junk credit is the job of the Fed, the Treasury, and Mike Castle (sitting on the Financial Services Committee).
I know of a high-end subdivision where the new home prices have come down about $125,000 — and the people who bought at the 2005 prices are thoroughly pissed!
But, so what? They took their chances, and it’s not like the phrase “housing bubble” was coined just this year.
Don’t think that this is anything new, though; the same thing happened in the late 1980s, when housing prices dropped. The media were full of stories of people who were “upside down,” meaning that they owed more on a house than the house was worth. Quite a few simply walked away, and let foreclosure take the house, but for those who toughed it out, they were right-side up by the early nineties.
It depends on whether you see your home as an investment, or as your home. If it’s just an investment, then maybe you do feel like you’ve lost something.